The author argues De Blasio's neighborhood rezonings are not triggering market interest; they are reacting to it it.

“Whose Bronx? Our Bronx!”

With those four words, repeated in unison numerous times at a September 2016, hearing on the scope of the environmental review for a city-proposed Jerome Avenue rezoning, hundreds of Bronx residents challenged one of Mayor de Blasio’s signature initiatives.

Mayor de Blasio ran for election in 2013 on a promise to preserve or create 200,000 apartments for affordable housing over a decade and the administration reports that it is on track to meet that goal. But two essential components of the Mayor’s housing initiatives, Mandatory Inclusionary Housing (MIH) and the rezoning of an eventual 15 areas to permit additional residential development are under attack in the very communities the Mayor’s housing initiative is designed to help.

While there are a number of reasons that each rezoning proposal generates significant opposition, there are a couple of interrelated concerns that reappear in every rezoning.

The role of the market

One commonly expressed concern is that the city is deferring to the market where the city should be saying no and concentrating on needed affordable housing. This may be well meaning but stopping new market-rate construction does not stop market forces. Indeed, new market-rate development follows market forces. New York’s history is full of examples.

In the 1950s, what later came to be called gentrification existed in only very small areas of the city such as Greenwich Village and a portion of Brooklyn Heights. Decade by decade, these gentrified communities expanded to Chelsea, the East Village and SoHo, and Cobble and Boerum Hills, Park Slope, Fort Greene and Carroll Gardens and then into the Lower East Side, Williamsburg, Greenpoint and now Bushwick and Prospect and Crown Heights and Windsor Terrace and so on.

These demographic changes were not induced by zoning changes. They were induced by more people wanting to live in neighborhoods in the central part of the city that had characteristics they appreciated. This drove up prices and induced some to find housing in nearby, similar or potentially similar neighborhoods thus driving up prices in the nearby communities as well.

Many people look at rising housing prices after rezoning and conclude that zoning has precipitated the price increases. But housing prices are rising pretty much everywhere in New York. A more accurate way to evaluate what is going on is to look at a control group that was not affected by the rezoning.

As a case in point, the new waterfront high rises in Williamsburg/Greenpoint have become emblematic to many observers about what happens after rezoning. These communities were rezoned in 2005 to permit high rises along the waterfront, in conjunction with affordable housing and construction of both high risers and affordable housing followed. This has led some to conclude that it is the rezoning that induces luxury housing. But a quick look at a natural control group that was not the subject of an upzoning—the inland blocks around McCarren Park—shows six high-rise buildings built or started prior to the 2005 rezoning. The market in these communities was already producing new high-end housing and expensive conversions of older industrial buildings before the rezoning.

Housing is a commodity and behaves just like other commodities. When more people want it prices rise and the commodity goes to those who can best afford it.

A recent New York Timesarticle provides a real life example – without any rezoning or new construction – of how a former suburbanite ended up in Washington Heights:

My house in Westchester County had become too large for me, and the taxes were high. One of my sons had settled in Brooklyn and another was contemplating a move back East from Colorado; moving into New York City made sense for me. I had rented an apartment on the upper end of Central Park West, but was priced out of that neighborhood when I wanted to buy. I rented in Harlem, but prices there were climbing fast, too. I wanted enough space to put up guests, to say nothing of books, my piano and a home office.

Helping whom?

A second concern addressed by the mayor’s opponents is that the city is seeking to help developers to expand the market and maximize profit but not to address the deficit of affordable housing for people with very low incomes.

The mayor’s rezoning plans have almost nothing to do with developers maximizing profits. As the administration presents its housing argument, its interest lies in maximizing the affordable housing that would be required as part of new development resulting from the city-initiated rezonings. If 1,000 units get built as a result of a rezoning, 200-300 new affordable apartments would be built many of which would not be built otherwise. This is because MIH builds in a cross subsidy in which some of the would-be-profit from the market-rate development underwrites the cost or part of the cost of the affordable housing. The mayor’s plan does not seek or even permit developers to maximize profit but it does need profitable market-rate housing. If there is no market-rate housing, this cross subsidy is not available and many fewer affordable units would be built.

The best argument made by the administration’s critics is that the income limits of MIH are too high to address the neediest community residents of the communities proposed for rezoning. The bottom threshold for MIH affordability is an average of 40 percent of area median income which for 2016 is $32,640 for a family of three. Such a family paying 30 percent of their income in rent could support a monthly rent of $816 which barely covers the cost of operating and maintaining housing leaving little, if any to support the capital costs of housing. For low-income families, the capital costs must be made up somewhere. For new or renovated housing it requires subsidy.

Most housing subsidies come from the public sector through direct expenditure of public funds or programs such as tax credits. Inclusionary Housing adds another source of such subsidies by capturing some of the value created by market-rate development and using it as a cross-subsidy for the affordable housing. What are the circumstances that have lead some housing advocates to conclude that expanding the sources for housing subsidy is a bad thing? They could not be more wrong.

It seems that the administration is hearing the demand for more subsidy money. In February, Mayor De Blasio committed to adding 10,000 new apartments for households earning less than $40,000 per year. Still, even in a city with an $84 billion budget, there is not enough money to offer subsidy everyone that needs it since that budget also pays for the schools that people need, the park they use and so on.

Increasing housing supply is not the answer to all of the city’s housing-related problems but the mayor’s housing initiatives address two related and important issues: the supply of affordable housing and the supply of market-rate housing that must be addressed as part of any housing policy to improve the lives of lower-income New Yorkers. They deserve support not opposition.

Sandy Hornick is the Principal of Hornick Consulting, Inc.

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